Henry Risman was presented an opportunity he was not expecting when his grandfather was ready to retire from his small but established Medford insurance business, he wanted to hand the reins over to Henry.
Today, Mr. Risman is President of Risman Insurance Agencies, an agency with multiple locations, dozens of employees, and many achievements, including a Five Star Designation and recognition as an Insurance Agents & Brokers of America (IIABA) National Best Practices Agency.
Over the years, Mr. Risman has looked for opportunities to grow his agency through acquiring like-minded independent agents, particularly those agencies that do not have a family-focused perpetuation plan in place. Mr. Risman and his team offer these businesses an avenue to become part of a larger, more modern operation while staying in their local community and serving the neighbors and fellow business owners who have come to know and trust them. As more and more national players enter the market, Mr. Risman’s focus continues to be helping local agents maintain their strong roots as Massachusetts independent insurance agents.
We recently had the opportunity to speak with Mr. Risman about the growth of his agency over the past several decades, what he thinks the keys to his success have been, and what he sees as the future for agency acquisitions.
The Risman Agency has been in business since 1927. Can you tell us the more detailed history of how it has now come to be one of the larger agencies in Massachusetts over the course of these years?
I am the fourth generation of Rismans to own and operate the agency. The agency’s office was located in Medford, MA, which remains our home office today.
When I took over the agency, I was very young and inexperienced in the insurance industry, so having my grandfather’s excellent reputation behind me as I worked to grow the business was very beneficial. His good name particularly helped me when working with the local banks and referral sources. It also helped that the agency was small and simple. I had one employee and one carrier at the time. We did not even have a computer system. I had very few responsibilities back then, except to sell.
We grew organically, at first, by being involved with the community, cold calling, using direct mail pieces to both personal and commercial audiences, and, primarily, through word of mouth.
I actually had a book that I got from CVS, in which I wrote every client’s name and premium in it. I still have that book. The premium size was low, the number of clients was relatively small, but it was a good core.
It wasn’t until several years later that our growth really took off, with acquisitions playing a larger role.
What about the size of the Risman Family of Insurance Agencies today? How many locations, employees do you currently have?
We currently have eight locations, including our headquarters in Medford. The other cities where we have offices are Dorchester, Melrose, Burlington, Tewksbury, North Reading, and Danvers, where we have two locations. Working across these locations, we have a team of forty-seven employees.
We also have an outsourced team to help with backend work. This frees up our employees to have more time to help our clients.
How many carriers do you represent? What carriers do you work with most? And, are you part of any agency alliance or aggregator?
We represent most of the major national and regional carriers. I think the count is around thirty-five now.
We have always had great relationships with all our carriers, and they have been strong supporters throughout the years. However, if I had to highlight two carriers who have been instrumental in our success, I would say Arbella Mutual and Norfolk & Dedham. These carriers were two of my first appointments when I took over the agency. Ever since then, they’ve always looked out for me, my business, and my customers, just as they do for many other agencies.
We are not part of any of the Networks at this time. While I don’t see the immediate need or benefit right now, it’s possible we might be open to joining one in the future.
Can you share how much premium your agency writes and the split between Personal Lines vs. Commercial Lines?
We write over sixty million in premium with a slightly higher percentage of personal to commercial.
Does your agency focus on a particular niche?
We do very well in the mid-sized commercial space with either family-owned or tightly controlled businesses. We do have a few niches that we have enjoyed success with. Overall, our primary focus is on writing quality business, in both personal and commercial lines.
You did not start acquiring agencies until 2001, is that correct?
Actually, we did acquire a tiny agency before then. However, what I consider our first major acquisition happened in 2001 when we acquired the Byette Insurance Agency.
Like much of our agency’s early growth, this acquisition came about by chance. I knew Jack Byette from an insurance agency council that we both were part of, and we started discussing our goals. I was looking to grow, and he had an interest in selling. Everything fell into place from that point forward, and the purchase went very smoothly.
After this first acquisition, and over the past decade, I realized that this was an opportune way to grow the agency at a faster rate and guarantee future success. This seemed like a better option to get the agency where I wanted to take it than just hiring a ton of producers.
What did you see as the advantage of acquiring agencies over increasing your producer plant for organic growth?
When you invest in a new producer, you’re always taking a chance. Especially if they don’t come with their own book of business, you’re putting a lot of time into someone, hoping they will produce for you.
On the other hand, an acquisition provides instant growth. The day I close on a deal, I own the premium. I also understand what I am buying. I know the loss ratios, the number of clients, the type of clients, and the carriers. After that, it’s up to my team and I to execute effectively to grow the agency that what we’ve acquired.
So, your first acquisition was in 2001. The last few years, however, have seen your agency on an impressive growth spurt. Can you tell us how this came about?
It is true that we have accelerated the pace in the past several years. We have embraced the opportunities that have presented themselves. In addition, we have a good, experienced team and infrastructure in place, which makes the integration of new agencies easier.
What is your philosophy of acquiring? Why do you believe it is so important?
My philosophy is simple: we need to grow. Growth is essential for a variety of reasons. First, to succeed in the future, you need size, efficiencies, and scale.
Second, it’s important to me to provide the best opportunities and career paths for our employees. You also need to give new employees a reason to come on board as well as a reason to stay with the agency long-term.
Finally, an agency needs to be able to mean something to its carriers, which requires growing a good book of business. By supporting our carriers in this way, they, in turn, provide the agency with more resources.
I do not want to say you are forced to grow, but if you want to ensure success in the future, it certainly helps.
What do you look for in a potential acquisition?
Many factors make an agency attractive to us. They include profitable, stable books of business, good employees, carrier mix, and location.
What do you bring to the table for acquisitions that you think other acquirers do not?
I think we have a good culture. We have good employees, who are trustworthy, professional, and we have the financial wherewithal to complete the deal.
Also, we are willing to be flexible and help sellers understand the process, so there are no surprises. It is stressful for a seller if they have not gone through a sale before, so working with a buyer who is willing to educate them on what to expect is a benefit. I think that our way of handling these transactions makes the transition much easier for the seller.
Perhaps you can expand on the flexibility, especially some of our readers who may be considering a sale of their agency might like to know what you mean by that?
We are flexible in many ways. First and foremost, we are flexible in how a deal is structured. We want to know, does the seller want all cash upfront, or do they prefer to structure the deal as an installment sale for tax reasons?
We always look at it from the seller’s perspective. The agency is likely the seller’s main asset. So, to make it work, you have to see the key components of the deal for them. A part of making the seller comfortable is having flexibility in structuring the deal.
Flexibility can also include protecting or keeping their employees or key employees and enabling the owner’s future role in the agency.
So, again, I think flexibility comes in many forms. I guess if I had to define it, it would be working with the seller to make sure that they get out of the deal what they want and need.
If a seller wanted an installment sale, for example, what kind of guarantees do they get?
It depends on the deal. If the seller is deferring a large amount of money, they are going to want some protection. In that case, if I must personally guarantee it, I am happy to do that for them.
In some purchases, we are aware that you hired the owners as employees. Is this a common practice that you use, and what are the advantages and disadvantages of that?
I very much value the previous owner. They bring knowledge of the clients, employees, and local connections.
Many owners would like to stay involved in the parts of the business that they enjoy, which is usually dealing with their clients.
Often, they want to get rid of the part of the business that they probably do not enjoy as much, which is the HR aspect, the administrative part of it. We’re open to sellers who want to work full-time for us or part-time. I still have previous owners working for me; I think there are six right now.
Going back to the Byette acquisition in 2001, the owner started with a one-year employment agreement with us, and here we are 19 years later, and he is still working for us and enjoying it.
Others choose to step aside right away. They just want to retire and move on, and that is fine with me, too.
For example, on the details, an owner staying on, many times, sellers or buyers will want the owner to stay on for a period at no compensation. Are you talking about buying the agency and then employing the owner under an employment contract with compensation for his work?
Yes, if that is what they are looking for. Some owners just want to stay on-board for a short transition period. I found, however, many of them would like to continue working. So, I employ them with a salary and a bonus structure. It is part of the deal.
What about the former employees? Are you flexible concerning the seller’s employees as well?
First, I want all their employees, but especially their good employees, to stay. That is critical; they are a big part of the agency. It really would not be a good thing for the culture if I went in there and cut their benefits or their compensation. Conversely, I like to go in there, preferably, and increase their pay and offer a good benefits package. If you have good employees, you have happy customers. That is a key component for why you want to make sure the employees are satisfied.
What kind of benefits package do you offer your employees?
Full health insurance, long-term disability, and 401(k) plan, in which we offer our employee’s a substantial match. We do this because we value our employees, and we want to make sure that they are not priced out of having the benefits they need now and for the future. So, by making it super attractive in our agency, they will worry less about benefits, contribute more, and stay for the long term. I do not think that many others in the industry are doing this.
Do your funding sources have any concerns about the rapid growth of the agency?
I do not believe so. We present a strong financial picture with a good balance sheet and a history of performance.
Are you looking to acquire more agencies?
Oh, yes, most definitely. We want to keep acquiring. You cannot always plan for them; you must embrace the opportunities when they arise.
In an ideal world, you would spread acquisitions out, but the reality is sometimes you end up with nothing for a while, then you end up with three opportunities in a month or two. You have got to be willing and able to execute a deal when that happens.
What do you think an insurance agency owner considering a sale or retirement should look for in a potential purchaser?
Each situation is slightly different. However, certainly, the culture, employees, and fit with the buyer is especially important. Working with a trustworthy, flexible, and experienced buyer makes for an easier and smoother process.
Where do you see the acquisition market going forward after COVID-19?
Nothing much has changed during COVID-19 with the known buyers like us, who are looking to acquire. However, what has changed is the number of private equity people who did not even exist two or three years ago who are suddenly in Massachusetts and New England looking to acquire.
If you take private equity out of the equation for a minute, I would think that prices would decline or, if not, the structure of the deals might change. If you bring private equity back into the picture, and they continue to chase after deals, I am not sure that much will change. While the last six months have not impacted most agencies —frankly, business is good—going forward, the next 12-18 months may be different as there is a lot of uncertainty about the economy.
Where do you see the Risman Agency’s future given the present pandemic and a post-pandemic recovery?
I do not see COVID as influencing our future. This pandemic is a terrible event with short- and long-term impacts. Ultimately, however, it is just one more challenge that we must adapt to.
What role does technology play in your agency, and what things has your agency embraced? For example, do your agents use multiple monitors? Do you use CRM or social media? Do you outsource any agency functions to improve efficiencies or costs?
We have always embraced technology. We were one of the first to go paperless, I believe, in 1999. All our employees have either three or four monitors on their desks as well as scanners. We do use a CRM program and are working on employing some new marketing and social media programs. Electronic signatures, VOIP phone systems, and cloud technology made going remote much easier when COVID-19 made us do so earlier this year. We do outsource many of the clerical backend processes as well as some accounting functions.
What about insurtech? As more and more insurtechs start to realize the importance of independent agents, are there any platforms or companies your agency uses?
We are looking at a few of them now. Some will present good long-term opportunities; others will not. The fact that the insurtech companies are now looking into the independent agent channels show the value we have to offer.
What do you see as the greatest challenges for Massachusetts agents over the next 3-5 years?
There is no shortage of potential challenges. The direct writers, with their strong marketing budgets, will not go away. The use of technology in direct to consumer and direct to business will impact the personal lines and small commercial marketplace. Threats from car companies, fintech, and companies such as Amazon, Apple, and Facebook will increase. They will impact market share but just as important will put margin pressures on us and our carriers.
What outlook do you have on the future of the independent agency system and the insurance industry in general for the coming decade?
I am a big believer in the future of independent agents. We bring many things to the table that fintech and the direct writers cannot provide at the local level. We need to take out inefficiencies, present a more unified front, and embrace new ways to bring value to the consumer. Certainly, we will need to continuously adapt to enjoy future success.